How we can we better understand the economic dynamism of small cities (MSAs with 50,000-500,000 residents)? The Federal Reserve Bank of Atlanta is engaged in ongoing research to better understand where and to what extent small cities are becoming “stickier” – that is, “pulling in residents and businesses from surrounding rural areas and newcomers from more urban areas.” The first article sets the stage by exploring population trends; a second article combines metrics of migration, commuting, new firm creation, and population densification into a raw index score for the stickiness of small towns. The top 10 cities on the small town stickiness index are:

Anchorage, AK

Gulfport-Biloxi, MS

Farmington, NM

Morgantown, WV

Lake Charles, LA

Odessa, TX

Bismarck, ND

Naples, FL

Saginaw, MI

Williamsport, PA

A somewhat related piece from the USDA’s Economic Research Service examines out-migration versus return migration in rural communities. Its key finding: “Stemming rural population loss and spurring economic development may depend less on retaining young adults after high school than on attracting them back as they settle down to start careers and raise children.” More highlights of the research:

Continued population loss in rural communities is caused as much by low in-migration as by high out-migration; in remote rural communities lacking natural amenities, return migrants make up a large share of total in-migration.

Return migrants potentially play a critical role in rural areas in slowing population loss, rejuvenating the population base, generating jobs, and increasing human, social, and financial capital.

Family ties, increased opportunities for outdoor recreation for the whole family, and fuller participation in school sports for their children were often mentioned as motivating factors for moving back to rural America.

Low wages and career limitations were cited as primary reasons for not returning home.

Currently in the business world we are witnessing something like the epic collision of two galaxies — a rapid convergence of two very unlike systems that will cause the elements of both to realign. It’s all thanks to the Internet of Things. If you are not familiar with the term, the Internet of Things refers to a dramatic development in the internet’s function: the fact that, even more than among people, it now enables communication among physical objects. By 2015, according to my own firm’s projections, not only will 75 percent of the world’s population have access to the internet. So will some six billion devices. The fact that there will be a global system of interconnected computer networks, sensors, actuators, and devices all using the internet protocol holds so much potential to change our lives that it is often referred to as the internet’s next generation.

For managers, this development creates challenges both long-term and urgent. They need to envision the valuable new offerings that become possible when the physical world is merged with the virtual world and potentially every physical object can be both intelligent and networked. And, starting now, they must create the organizations and web-based business models that can turn these ideas into reality.

As consumers, we have all had a glimpse of how the relationship between buyer and seller changes when devices are connected to the internet. Nobody these days carries a Sony Walkman and cassettes; instead we carry Apple iPods — and our major access point for music has become the online iTunes Store, also by Apple. The company sells the devices and the music, profiting handsomely from both. In the same way, industrial product buyers are seeing their relationship to equipment manufacturers changed by smart, connected things. In the field of mechanical and plant engineering, consider the advent of predictive maintenance. When a machine is fitted with sensors, it can know what condition it is in and, whenever necessary, initiate its own maintenance.

Clearly, when things are networked, that has an impact on how actual value is produced. In many cases, it is no longer the industrially manufactured product that is the focus, but rather the web-based service that users access through that device. So, for example, we see the Daimler Group investing in mobility services such as car2go, myTaxi, and moovel; GE using what it prefers to call the “Industrial Internet” for mechanical and plant engineering services; LG paving the way to “smart homes” with IP-enabled televisions and home appliances and related services.

A study undertaken by researchers from the Institute of Technology Management at the University of St. Gallen in Switzerland (Service Business Development: Strategies for Value Creation in Manufacturing Firms) concludes that these services are most definitely lucrative for traditional manufacturers. Considering the example of a papermaking machine, they note that the sale of the machine itself generates a margin of around one to three percent, while selling a related service yields five to ten times as much. The ratio is much the same for the sale of rail cars versus related mobility and maintenance services.

For “Old Economy” companies, the mere prospect of remaking traditional products into smart and connected ones is daunting. (My own company, for example, the Bosch Group, produces over half a million things each day across more than 1,500 product categories.) But embedding them into a services-based business model is much more fundamentally challenging. The new models have major impacts on processes at the corporate center such as product management and production and sales planning. And given the dynamism of the net, the innovations will have to come more quickly. In short order at Bosch we have founded Bosch Software Innovations as a new software and systems unit; launched anelectromobility service in Singapore; introduced cloud-based security products; an IP-enabled Bosch security camera , and provided customers with an iPhone app for remote access to heating systems. (We also demonstrated ideas about the near-future of networked living at the Consumer Electronics Show (CES) in Las Vegas.)

In many and diverse sectors of the global economy, new web-based business models being hatched for the Internet of Things are bringing together market players who previously had no business dealings with each other. Through partnerships and acquisitions, Old Economy and New Economy (software based) companies are combining complementary strengths so they can move quickly into vast spaces of “blue ocean.” In real time they are having to sort out how they will coordinate their business development efforts with customers and interfaces with other stakeholders.

What we have, then, is a competitive arena full of Old and New Economy companies, all jostling for position and attempting to shape the future. Long-standing producers in traditional industrial fields — whether they make coffee machines, cars, air conditioners, home gym equipment, or shoes — are suddenly not only competing with companies of their own breed; they are also confronting players the likes of which they have never faced before.

Most know that their strategy going forward will have to balance two imperatives. They have to protect the turf they already own — today’s product business — while pursuing growth through service offerings that leverage the fact that the product is in place to offer a richer overall value proposition to customers. (What no traditional manufacturer should conclude is that the Internet of Things is a threat that must be fought off in order to preserve the value of the manufactured product and safeguard the capital tied up in production facilities.) Given the reality of limited resources, this lands many traditional product companies at a crossroads. Every new investment they make can go either to strengthening their product-centric facilities, supply chains, human resources, and brands, or to stretching them into the new territory of higher-margin services. The wisest course, most find, is to make investments in both directions, looking to achieve that magic balance that maximizes margins.

As a result, not only in the marketplace but also within firms, completely contrasting business practices, corporate structures, and cultures are crashing into each other. And indeed, for the Internet of Things to fully emerge, they must collide.

As the New Economy and Old Economy galaxies clash, people tend to anticipate that one will destroy the other — and many would observe that the greater momentum is on the New Economy side. Certainly, many differences will need to be overcome before the Old Economy and the New Economy fit together. (Controlled systems on the one hand are opposed by open communities on the other. One keeps a vigilant eye on scant resources, whereas the other in essence gives its services away for free.) But most likely, the two galaxies will morph — as the Milky Way and Andromeda are expected to do: a new system with new dynamics will be created. In the dance around new centers of gravity, new solar systems of partnership will be formed. The question for you is: in this new cyber-physical galaxy, will your company become a new sun, a planet, a minor moon — or be reduced to stardust?

Ashtabula County has a significant concentration of industrial companies that must meet their workforce needs in the short and longer terms. The Industrial Internet of Things (IIoT) will either strengthen or weaken these companies in the future from many standpoints, including the design of work and future workforce development.

According to researchers at Accenture, eighty-seven percent of business leaders believe that the Industrial Internet of Things (IIoT) will result in the net creation of jobs. Intelligent machines will automate mundane tasks, freeing up workers to perform more creative and collaborative work with wider networks of people and machines. For example, real-time data access will enable today’s blue collar workers to jointly analyze and adjust the performance of drill equipment in a mine or design products more iteratively with the use of rapid 3D printed prototypes.

The IIoT will augment work through innovations, such as wearable technology. Global positioning system (GPS) navigation is an early example. Accenture and Royal Philips have created a proof-of-concept demonstration that uses a Google Glass™ head-mounted display for researching ways to improve the effectiveness and efficiency of performing surgical procedures. This solution could provide physicians with hands-free access to critical clinical information. Theoretically transferable to other industries, the application could be used to help field engineers repair equipment with which they are unfamiliar, for instance.

As IIoT growth takes hold, the need for talent will intensify. What is more, entirely new categories of jobs will be created: in digital medicine and precision agriculture, for example. The demand for digital literacy will be at a premium, with new skills required in specialist roles from digital robot design and management to transport network engineering and data analytics. As digital technology blurs or removes organizational boundaries, it will create more flexible workplaces that will appeal to sought-after Millennials and other groups that will be required to deliver new customer-oriented services. The impact will be felt on the workforce at every level and will require greater delegation by leadership and more decentralized decision making by individual employees.

Local policies can delay smart city projects, increase their costs, and reduce their impact. But cities around the world have successfully implemented policy changes that accelerate progress. Hear best practices from those who have gone before. Additionally, get advice about procurement policies that avoid overpaying and vendor lock-in, key performance indicators to measure where you are and prove your progress, data privacy policies that can unleash open data while safeguarding citizens, and other proven policy ideas.

The Internet of Things (IoT) is on its way, and it will touch Ashtabula County on all levels. Therefore, we need to learn more about the IoT.

The Internet of Things (IoT) is a scenario in which objects, animals or people are provided with unique identifiers and the ability to transfer data over a network without requiring human-to-human or human-to-computer interaction. IoT has evolved from the convergence of wireless technologies, micro-electromechanical systems (MEMS) and the Internet.

A thing, in the Internet of Things, can be a person with a heart monitor implant, a farm animal with a biochip transponder, an automobile that has built-in sensors to alert the driver when tire pressure is low — or any other natural or man-made object that can be assigned an IP address and provided with the ability to transfer data over a network. So far, the Internet of Things has been most closely associated with machine-to-machine (M2M) communication in manufacturing and power, oil and gas utilities. Products built with M2M communication capabilities are often referred to as being smart. (See: smart label, smart meter, smart grid sensor)

IPv6’s huge increase in address space is an important factor in the development of the Internet of Things. According to Steve Leibson, who identifies himself as “occasional docent at the Computer History Museum,” the address space expansion means that we could “assign an IPV6 address to every atom on the surface of the earth, and still have enough addresses left to do another 100+ earths.” In other words, humans could easily assign an IP address to every “thing” on the planet. An increase in the number of smart nodes, as well as the amount of upstream data the nodes generate, is expected to raise new concerns about data privacy, data sovereignty and security.

Although the concept wasn’t named until 1999, the Internet of Things has been in development for decades. The first Internet appliance, for example, was a Coke machine at Carnegie Melon University in the early 1980s. The programmers could connect to the machine over the Internet, check the status of the machine and determine whether or not there would be a cold drink awaiting them, should they decide to make the trip down to the machine.

Kevin Ashton, cofounder and executive director of the Auto-ID Center at MIT, first mentioned the Internet of Things in a presentation he made to Procter & Gamble. Here’s how Ashton explains the potential of the Internet of Things:

“Today computers — and, therefore, the Internet — are almost wholly dependent on human beings for information. Nearly all of the roughly 50 petabytes (a petabyte is 1,024 terabytes) of data available on the Internet were first captured and created by human beings by typing, pressing a record button, taking a digital picture or scanning a bar code.

The problem is, people have limited time, attention and accuracy — all of which means they are not very good at capturing data about things in the real world. If we had computers that knew everything there was to know about things — using data they gathered without any help from us — we would be able to track and count everything and greatly reduce waste, loss and cost. We would know when things needed replacing, repairing or recalling and whether they were fresh or past their best.”

In my last blog, I began an attempt at explaining how cultural subgroups can make a town great, or divide it in two – but that unique cultural characteristics can make for more resilient communities if they can use social capital and access to public spaces to provide for more social connections. Providing a space for social connections is often found in the form of cultural enhancements – in particular, through placemaking – and can help with a community’s age-old challenge of bringing people together, which can begin a self-perpetuating condition of worker attraction and retention.

We generally think of cultural enhancements as providing residents who live in close proximity to a place with art, life and vitality. This can be in the form of programmed art and events, and, most commonly, providing public spaces to gather people, and to ultimately maximize social connections. An example of placemaking that aims to bring people together is the Kewa cultural district in (Santo Domingo) Pueblo, New Mexico. This cultural district’s core principles demonstrate how building placemaking into the City’s budget and development goals can foster economic prosperity and lasting conservation. The cultural district is an attempt to bridge cultural divides, and then create social connections, by weaving together the arts and environmental stewardship, and eventually making a stronger community through the cultivation of their public arts.

As Kaid Benfield notes in 4 Examples of Powerful Placemaking: “The Kewa Pueblo, located between Albuquerque and Santa Fe, is currently occupied by more than 3,600 tribal members…The pueblo has a strong cultural tradition but also some serious social challenges, including 25 percent of tribal members living below the poverty level and a 23 percent unemployment rate. Its once-iconic trading post was destroyed by fire in 2001 and is only now being rebuilt. (Kewa is also known as the Santo Domingo Pueblo, the name it was given by the Spanish in the 1600s.)” The National Endowment for the Arts “is helping tribal authorities, Enterprise Community Partners, Cornerstones Community Partnerships, the Sustainable Native Communities Collaborative, and Atkin Olshin Schade Architects create a cultural district plan for the pueblo that could form the basis for economic development. In particular, the plan will document the heritage of the Kewa/Santo Domingo Tribe and establish culturally appropriate guidelines for conservation of historic adobe structures and for compatible new development. The plan will also promote cultural and artistic entrepreneurship.”

In Rifle, we are working with the City on an exciting downtown revitalization project. The overarching goals of the downtown strategic plan, although ultimately directed towards catalyzing overall economic development for the small town, are also incrementally providing social capital by addressing the needs for walkability and a bike system. According to Rogers et. al., “walkability enhances social capital by providing the means and locations for individuals to connect, share information, and interact with those that might not otherwise meet.” The intent of the downtown revitalization, increased walkability, and bike system are all pieces that can attract new talent to Rifle by enhancing its cultural amenities.

As a part of the Rifle project to assist with communications and outreach, we interviewed locals about Rifle – its past, present and future. Working with Spruce Creek Multimedia, Rifle’s very own multimedia business, we developed an inspirational video that is now being shown at the local theatre before the feature presentation. Not only has the video helped get the word out, but it’s also a touchpoint for conversations about the future of Rifle. People can discuss what they’ve seen in the video, and use it as a platform to talk about their community, what they’ve accomplished, and where it’s headed.

These two examples of building cultural amenities to attract and retain a talented workforce – in two distinctly different communities – are simply a starting point of how providing for social connections can be a part of the recipe for creating a great place. Performing arts centers, museums and other cultural amenities directly and indirectly employ hundreds of thousands of workers each year.

According to Jack Rouse Associates blog, “They foster a community climate that attracts innovation workers and entrepreneurs, which creates a talent pool attractive to businesses and business accelerators. Most importantly, they give companies and employees a reason to stay, spurring a self-perpetuating culture of innovation and economic growth.”

For more on these ideas, and how healthy downtown cores can help drive a local economy, check out our next installment of our webinar series coming up October 23rd: “Downtown Starts Here,” featuring Lisa Harmon, Executive Director, Downtown Billings Association.

A vibrant arts scene and creative economy deliver multiple economic development benefits for a community, including small business creation and the attraction of new residents (Next City). Additionally, the spillover effects from creative enterprises can stimulate growth in more profitable technology and innovation-based sectors.

But cities are expensive, and creative types are typically not affluent. “Too often…the creative sector is a victim of its own success. Gravitating to affordable neighborhoods, creative professionals have become an emblem of gentrification, attracting interest in a new area while ultimately pricing themselves out,” writes Adam Forman of the Center for an Urban Future.

A new way the city evaluates its creative economy is through a BRE-like “music census” of 4,000 musicians and those employed in the music industry. The survey discovered that affordability is a chief concern for the city’s musicians. Many of the report’s suggestions mirror traditional economic development practices, such as easing permitting requirements and establishing “music zones” that would function like industry clusters.

Other solutions? Rather than offering isolated arts initiatives, embedding culture and the arts into everyday zoning and planning practices can promote a sustainable creative economy. Cities like New York, Nashville, and Minneapolis have affordable housing programs for artists. New York also provides stipends and cheap studio space to artists in exchange for working with the elderly. Kansas City, Missouri’s Economic Development Corporation recently began offering microloans to artists looking to expand their creative enterprises (KC Metropolis).

Avoiding Sprawl in Rural Areas, Amy Kosterlitz, 08/1997 – Although this article predates SSB 6037 and recent court and hearings board cases, it is still one of the best analyses of GMA legal requirements for rural areas

Putting Smart Growth to Work in Rural Communities, International City/County Management Association (ICMA), 2010 – The report provides a set of tools that leaders from rural communities and small towns can use to help attract and direct future growth while ensuring that it meet their economic, environmental, and public health goals

Rural America At A Glance Series, USDA Economic Research Service – These annual briefs highlight the most recent indicators of social and economic conditions in rural areas for use in developing policies and programs to assist rural areas. Reports in this series use current social and economic data to highlight population, labor market, income, and poverty trends in rural areas. Also “At A Glance” briefs on special topics such as rural broadband or rural transportation

Rural and Resource Area Densities, excerpted from “Art and Science of Designating Urban Growth Areas: Some Suggestions for Criteria and Densities,” Community Trade and Economic Development (CTED) – Still a very helpful discussion of considerations in establishing rural densities

What is Rural? Revised and updated by Louise Reynnells, US Department of Agriculture (USDA), Rural Information Center, 09/2008 – Links to rural definitions used by Census and various federal agencies, and to resources on rural maps and data, rural values, rural character and other rural topics

What to Do About Rural Sprawl?, by Tom Daniels, paper presented at American Planning Association Conference, Seattle, 04/28/1999 – Although older, this is a particularly insightful look at the issue of rural sprawl and the potential tools to address sprawl in rural areas.